Arco Plaza, Its Image Getting a Make-Over

After years of neglect, property owner Shuwa Investment Corp. has begun to polish one of its crown jewels--Arco Plaza in downtown Los Angeles--and its reputation.

The Japanese company has been perceived by many real estate brokers as one of the city’s most difficult and frustrating landlords, unwilling to put up money for improvements, slow to make decisions and all but invisible. It’s little wonder then that more than 30 floors in Arco Plaza’s twin skyscrapers have been vacant for years.

“Some [potential tenants] are a little bit leery because they [Shuwa] have a reputation for being difficult,” said one Arco Plaza tenant.

But earlier this year, Shuwa hired brokerage firm Cushman & Wakefield to market Arco Plaza’s office space after performing the job in-house for most of the 15 years it has owned the building. Law firm Allen, Matkins, Leck, Gamble & Mallory has been retained to handle leasing negotiations, broker Jason Werner said.

Werner said a major part of his job is “changing the perception” of Arco Plaza. As an example, Shuwa is now willing to finance tenant improvements after refusing to do so for several years.

“They want to make things happen,” Werner said.

When it was dedicated in 1973, Arco Plaza and its pair of 52-story skyscrapers and an underground shopping center heralded a new generation of giant downtown office projects. Set on a huge plaza at 5th and Flower streets, the dark green granite towers attracted such blue-chip corporate tenants as Bank of America and, of course, Arco.

In 1986, as Japanese investors were picking up prime pieces of U.S. real estate, Shuwa made headlines when it purchased the nearly 2.5-million-square-foot Arco Plaza for a staggering $650 million.

But within a few years, corporate mergers had whittled away at Arco’s tenant roster and a crop of new skyscrapers constructed in the late 1980s depressed rents. Shuwa seemed reluctant to finance the property improvements needed to keep Arco Plaza competitive.

“In a soft marketplace, Shuwa didn’t want to fund improvements,” said CB Richard Ellis broker Whitley Collins. “I don’t think they were ever committed to any one plan.”

A few years ago, Shuwa put Arco Plaza and the rest of its U.S. portfolio up for sale. But after selling several buildings, Shuwa took Arco Plaza off the market, according to brokers.

Shuwa officials could not be reached for comment.

Nearly half of the complex--about a million square feet--is available for lease. Many Arco Plaza tenants are eager for change.

“We love it. It’s a great location,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., which has been a tenant since 1994. But, “when you go into an elevator you notice the scratched wood paneling. It needs a lot of TLC.”

In the biggest sign of a turnaround, the architecture firm Daniel, Mann, Johnson & Mendenhall is looking into moving its 500-member headquarters staff into the complex. It has also been commissioned to update Arco Plaza lobbies.

Cushman & Wakefield is negotiating leases involving 16 full floors, said broker Reid Tussing.

Broker Robert Chavez of the Staubach Co. said Arco Plaza could regain much of its lost luster and once again command top rents.

“If they put the money in the right places,” Chavez said, “it would be a spectacular facility.”